Int on fd taxable on accrual basis or cash basis

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my friend is working as a bank. in dec he invest rs 100000 in normal fd for 6 months which will mature in may 2016. now i want to know as per sec 145 of income tax his int on fd from dec to march will be taxable in f.y 2015.16 or nothing will taxable in this year. can he show that he follow cash system to save his tax because his next year income including this int will be below 250000 Thanks in advance
Replies (10)

it is upto you to decide whether you follow cash or accrual system. However, from TDS credit perspective, it is advisable to claim it on accrual basis only.

But if his next year income wipl be nil than cash basis will save tax for him.

Int  on 1 lk  for three months will be less than 10000 and hence no TDS will be deducted.  In fact the TDS will not be deducted even after six months on maturity.  You can take full interest in AY 2017-18 [FY 2016-17].

Your friend is working in a bank receiving salary. Hence, he has an option to follow cash or accrual system , whichever is more beneficial to him. However, if he has business income also where he follows accrual system of accounting then he should follow accrual system only for FD interest also. 

Ya i think cash basis will be more beneficial fir him.
Correct me if I am wrong but can't you follow accural basis for PGBP and cash basis for Other Sources Simultaneously?

Rightly said, the same is also mentioned by CA Ruchi(See the earlier comments).

Originally posted by : vishal gupta
Correct me if I am wrong but can't you follow accural basis for PGBP and cash basis for Other Sources Simultaneously?

 

There is no requirement to follow same method of accounting for all sources of Business and other income. Assessee can follow different methods of accounting for different sources. He may employee cash basis for 1 source of business/other income and accrual for another source of business/other income.

However he must not employ different methods, for different years, in respect of a particular source of income.

From FY 2015-16, CBDT has notified Income Computation and Disclosure starandard.As per standard on revenue recognition, it is compulsory to calculate interest on accrued basis. There is no choice for assessee.

Originally posted by : dkshahca
From FY 2015-16, CBDT has notified Income Computation and Disclosure starandard.As per standard on revenue recognition, it is compulsory to calculate interest on accrued basis. There is no choice for assessee.

Dear DK Shah,

 

Thanks for this. As pointed out by you, it actually applies to income from other sources too.


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